Coal fields in South Africa.

Black Gold Ltd Case Study

Black Gold Ltd is a Japan-based multinational company engaged in the production of thermal power. This electricity is purchased by many manufacturing companies in Japan. Black Gold started its operations in 2004. In order to cut down cost of raw material (coal), the company has also invested in Coal fields in South Africa. The extract from Black Gold’s financial statements is provided. Currently, Black Gold is considering purchase of a coal mine in Indonesia. For this project, the company needs a loan of $5 billion. The project will run for 20 years. End-value of the project (scrap value) is zero.

Extract from the financial statements of Black Gold Ltd for the financial years ended 2012, 2013 and 2014 (amount in million $)

2012 2013 2014

Equity 1200 1200 1200

Reserves 18300 20300 22600
Long-term loan 46700 45900 47500

Short-term loan 14950 11550 12120
Fixed assets 68990 72750 76750

Current assets 21160 25970 24120
Revenue 39352 46990 52750

Expenses 36290 45160 50160

Gross Profit 3062 1830 2590
Task:
You are the manager of the Loans Department of the Rich Bank, which is an Indonesia-based bank. As a manager, you need to process Black Gold’s loan application and submit an internal report to Mr. Widodo who is the Managing Director of the bank. The focus of the report will be the potential risks and returns for the bank. Together with the financial aspect, you will need to consider various other relevant aspects and analyse this proposal. Based on the analysis, make your recommendation.

Important:
This is a research-based assignment. The topic pertains to the lending activity and related risks and returns for a commercial bank. You will need to collect data and information from books, journals, magazines, reports and/or any other relevant resources (print and online material) available. Minimum seven references are required. Write your recommendations at the end of the report. Also note, this report will focus on the finance side (risks and returns) and there will be very little accounting analysis of the firm (very brief accounting data has been provided). Analysis of accounting information would generally include % increase/decrease, relevant accounting ratios and any other way in which you can think of number-crunching. The report has some additional requirements such as executive summary, letter of transmittal and so on.

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